Computer fiasco costs taxpayers £170m

Taxpayers forked out a total of £170 million to sort out problems caused by a major Government computer fiasco, a report revealed.

The total included around £100 million in compensation for errors by the notorious NIRS2 system and almost £70 million to resolve difficulties with the increased flow of work in the Inland Revenue and Department of Work and Pensions following its introduction.

The chairman of the influential House of Commons Public Accounts Committee, Edward Leigh, said thousands of pensioners had suffered as a result of difficulties and delays in implementing the system.

The report by the National Audit Office should draw a line under the "sorry affair", he said.

An Inland Revenue spokesman stressed that the system was now working successfully and that much of the additional spending had led to improvements in the operation of National Insurance.

Andersen Accounting - now called Accenture - won a contract from the then Department of Social Security in 1995 to develop and operate the NIRS2 system to improve handling of National Insurance contributions.

After it went live in 1997, payments to thousands of pensioners and people on low incomes were disrupted as a result of glitches in the system.

A damning 1999 Public Accounts Committee report found more than 1,500 faults in the computers.

The report revealed that a compensation scheme launched in 1998 by the Inland Revenue and Department for Work and Pensions had paid out £85.7 million by the time it was closed in April last year.

A further £15.3 million was paid out in compensation for a second foul-up in 1999-2000, when rebates worth millions of pounds were overpaid to thousands of pension schemes.

The Inland Revenue demanded the money back, but was forced to compensate those who had invested the overpayments in shares and seen them slump in value as the stock market plummeted.